[Opinion] No recovery based on GSTR 2A information

S.V.S. Raghavendra Rao & S.V.S.N. Sasidhar Rao – [2022] 139 taxmann.com 479 (Article)

Background

Sub Rule (4) of Rule 36 of GST act effective from 09-10-2019.

Notification No. 49/2019 – Central Tax New Delhi, the 9th October, 2019 – In the said rules, in rule 36, after sub-rule (3), the following sub-rule shall be inserted, namely:-

“(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.“

Therefore, the claim of ITC based on GSTR-2A was not mandatory till 09-10-2019. It is only effective from 09-10-2019 under Rule 36(4) with a condition that Input tax credit to be availed by a registered person shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.

Primary conditions to claim Input Tax Credit under GST

Section 16(1) – Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

Section 41 – Claim of input tax credit and provisional acceptance thereof – (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.

Section 49(2) – The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with “section 41 or section 43A”, to be maintained in such manner as may be prescribed.

Therefore, it is pertinent to remember that when the GST acts mandates the Buyer/Recipient to pay related tax to the supplier on his inwards, such tax paid to the supplier is a legitimate credit to the buyer/recipient. And it is very important to note that the claim of ITC based on auto populated inward supplies in GSTR 2A under rule 36(4) was effective from 09-10-2019 only. So any demand and recovery prior to this period based on difference in between GSTR 2A and GSTR 3B is not in accordance with the law and is against the law.

GSTR 2A is only a facilitator

CBIC Press Release Dt. 18-10-2018

At point No 4: It is clarified that the furnishing of outward details in FORM GSTR-1 by the corresponding supplier(s) and the facility to view the same in FORM GSTR-2A by the recipient is in the nature of tax payer facilitation and does not impact the ability of the tax payer to avail ITC on self-assessment basis in consonance with the provisions of section 16 of the Act. The apprehension that ITC can be availed only on the basis of reconciliation between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM GSTR-3B for the month of September, 2018 is unfounded as the same exercise can be done there after also.

And the Hon’ble Gujarat High Court in the case of Deepak Print v. Union Of India [2021] 125 taxmann.com 197, has clearly pointed out that the form GSTR-2A was not available till 2018, in the portal. And further stated as follows:

At Point No 15: While the GST regime envisaged the filing process and recording of ITC and payment of taxes as above, admittedly, due to system issues and under preparedness with regard to the extent of data to be processed, Form GSTR-2 and 3 were not made operational; and have been now completely done away with. Form GSTR-2A was made operational only in September 2018 by the Government. This Form is also valid in respect of the past periods commencing July 2017. The Respondents do not dispute that the statutory scheme envisaging the filing of return GSTR-2 and 3 could not be put into operation and has been indefinitely deferred.

At Point No 23: The additional affidavit filed by the Respondents as per the directions of this Court, also skirts this question and has only attempted to give some explanation which is not convincing and lacks objectivity and rationality. Respondents have admitted that the facility of Form GSTR-2A was not available prior to 2018 and, as such, for the months of July, 2017 to September, 2017 the scheme as envisaged under the CGST Act was not implemented. Respondents have also clearly acknowledged that there could be errors in Form GSTR-2A which may need correction by the parties and have, in fact, permitted the rectification, clearly reinforcing the stand of the Petitioner.

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